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Large trades and intraday futures price behavior
Author(s) -
Frino Alex,
Bjursell Johan,
Wang George H. K.,
Lepone Andrew
Publication year - 2008
Publication title -
journal of futures markets
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.88
H-Index - 55
eISSN - 1096-9934
pISSN - 0270-7314
DOI - 10.1002/fut.20366
Subject(s) - market liquidity , futures contract , economics , equity (law) , financial economics , monetary economics , mid price , price formation , price level , political science , law
This study examines the effects of large trades executed by outside customer on the prices of futures contracts traded on the Chicago Mercantile Exchange. We find that, on average, large buyer‐initiated trades have a larger permanent price impact (information effect) than large seller‐initiated trades, whereas the opposite is found for the temporary price impact (liquidity effects) of large trades. These results are consistent with previous findings for block and institutional trades in equity markets. However, we also find that the information effects of large sells are larger than large buys in bearish markets, whereas the results are the reverse in bullish markets. The liquidity price effects of buys are larger than the liquidity price effects of sells in bearish markets whereas the reverse results hold in bullish markets. Our results are consistent with the hypothesis that the current economic condition is a key determinant of asymmetric price effects between large buys and large sells. © 2008 Wiley Periodicals, Inc. Jrl Fut Mark 28:1147–1181, 2008